PAGE 1 OF 9 | AFFORDABILITY EXEMPTION PRIMER TY2016, updated February 2017 Affordability Exemption Primer Codes A and G STEP 1: To begin, screen the uninsured person for eligibility for other exemptions. (One requirement of the affordability exemption is that the person is not eligible for other exemptions.) STEP 2: Section A in the Affordability Worksheet in the Form 8965 instructions (page 10) calculates the affordability threshold, the maximum affordable amount. Compare the cost of insurance (referrred to as the required contribution amount) to the affordability threshold. • Affordability threshold (tax year 2016) = .0813 x household income STEP 3: Determine what type of affordability exemption each uninsured person in the household might be eligible for. There are three options. STOP at the first one that applies to each uninsured household member. Use the Marketplace Coverage Affordability Worksheet to determine cost of coverage Get the plan cost(s) from the taxpayer. Figure out the cost to the employee or the employee's family for the entire year ("annualized premium"). Enter annualized premium on table for each month it applies. WHAT'S INCLUDED IN HOUSEHOLD INCOME? • AGI (Form 1040, line 37) • Tax-exempt interest (Form 1040, line 8b) • Foreign income (Form 2555, line 45 and 50) • If dependent has a tax filing requirement, include dependent income • If someone in the household paid for coverage through a salary reduction agreement, include that amount as income STEP 4: CODE A Calculate the affordability of the offer of coverage: • Annualized premium for a month > Affordability threshold = Unaffordable A person can claim CODE A exemption on Form 8965 for that month FORM 8965 INSTRUCTIONS: AFFORDABILITY WORKSHEET
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PAGE 1 OF 9 | AFFORDABILITY EXEMPTION PRIMER TY2016, updated February 2017
Affordability Exemption PrimerCodes A and GSTEP 1:
To begin, screen the uninsured person for eligibility for other exemptions. (One requirement of the affordability exemption is that the person is not eligible for other exemptions.)
STEP 2:
Section A in the Affordability Worksheet in the Form 8965 instructions (page 10) calculates the affordability threshold, the maximum affordable amount. Compare the cost of insurance (referrred to as the required contribution amount) to the affordability threshold.
• Affordability threshold (tax year 2016) = .0813 x household income
STEP 3:
Determine what type of affordability exemption each uninsured person in the household might be eligible for. There are three options. STOP at the first one that applies to each uninsured household member.
Use the Marketplace Coverage Affordability Worksheet to determine cost of coverage
Get the plan cost(s) from the taxpayer. Figure out the cost to the employee or the employee's family for the entire year ("annualized premium"). Enter annualized premium on table for each month it applies.
WHAT'S INCLUDED IN HOUSEHOLD INCOME?
• AGI (Form 1040, line 37)• Tax-exempt interest (Form 1040, line 8b) • Foreign income (Form 2555, line 45 and 50)
• If dependent has a tax filing requirement, include dependent income
• If someone in the household paid for coverage through a salary reduction agreement, include that amount as income
STEP 4: CODE A
Calculate the affordability of the offer of coverage: • Annualized premium for a month > Affordability threshold = Unaffordable A person can claim CODE A exemption on Form 8965 for that month
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Codes A and G
EXAMPLE: ARE FRED OR WILMA ELIGIBLE FOR THE AFFORDABILITY EXEMPTION?
Let's take a married couple, Fred and Wilma, who were uninsured all year. Their household income was $25,000 for the year. Wilma's employer offered both employee coverage and family coverage:
• The employee-only premiums cost $150/month (Annualized premium: 150 x 12 = 1,800)
• The employee + spouse premiums cost $400/month (Annualized premium: 400 x 12 = 4,800)
Wilma: $1,800 < $2,033• Not eligible for Code A exemption
Fred: $4,800 > $2,033• Eligible for Code A exemption• Complete Form 8695
Annualized premiums
2,033
= income x 8.13% (% of affordability in 2016)
STEP 5 (if applicable): CODE G
If multiple people in the household have employer coverage offers:There is a special exemption that may be claimed if the self-only offer is affordable but the combined cost crosses the affordability threshold. This can only be claimed if:
• Multiple people have employer offers of coverage.• The cost of self-only coverage is affordable for each person. (Each is less than the affordability threshold.) • The cost of self-only coverage for both, combined, exceeds the affordability threshold. • Family coverage is not offered, or, if it is offered, its cost exceeds the affordability threshold.
If this exemption applies for any month of the year, the CODE G exemption can be claimed for the entire year for the entire household.
example: affordability worksheet, affordability threshold and annualized premiums
Why do we use an "annualized" premium for each month? The affordability threshold is always based on a percentage of annual income. Using annualized premiums allows an apples-to-apples comparison between premium cost and income in the relevant months.
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Marketplace Coverage Affordability Worksheet
form 8965 instructions: marketplace coverage affordability worksheet
Caution: Use this exemption only if the uninsured person does not have an offer of coverage from an employer.
LINE 1: LCBPAsks for the lowest cost bronze plan (LCBP) for everyone in the tax household who is:
• not offered employer-sponsored insurance, and
• not otherwise exempt. Find this value using the Tax Tool for your Marketplace.Remember: Include people who are insured through Medicare or Medicaid! If married filing separately, enter LCBP here and on Line 12 (skip lines 2-11).
LINE 6: If less than 1.0 (100% FPL) or over 4.0 (400% FPL), skip lines 7-10. Note: This % will also help identify who is eligible for Medicaid in Line 10.
LINE 13: ANNUALIZED MONTHLY PREMIUM Compare this amount to the affordability threshold.
The Marketplace Coverage Affordability Worksheet is in the Form 8965 instructions (page 11).
LINE 10: SLCSPAsks for second lowest cost silver plan (SLCSP) for everyone in the tax household who is:
• not eligible for any other MEC, and • not eligible for another exemption.
Using the same Tax Tool you used to determine the amount in Line 1, find the SLCSP. Remember:
• Exclude people who are eligible for or enrolled in employer-sponsored coverage, Medicare, Medicaid, or other public coverage.
• If Married Filing Separately, enter zero on Line 10.
TO DETERMINE MEDICAID ELIGIBILITY FOR THE TAX TOOL: If the taxpayer lives in a Medicaid expansion state:
• If Line 6 is less than 138% FPL (or a higher number, depending on your state's rules in Table 1), consider the person eligible for Medicaid Line 10 is zero
If the taxpayer lives in a state that did not expand Medicaid: • If Line 6 is less than 138%, the household is eligible for Code G
(residing in a state that did not expand Medicaid) • If Line 6 is 138%-400% FPL, consider the adults eligible for PTC
Enter SLCSP value in Line 10 Medicaid coverage for children:
• For a child, if Line 6 is less than the FPL % in Table 1, consider the child eligible for Medicaid/CHIP The SLCSP for the child is zeroNote: Children are eligible for Medicaid at a higher income. Look at Table 1 to determine when uninsured children may be eligible for Medicaid and have a SLCSP of zero.
SOURCE: Kaiser Family Foundation, "Medicaid and CHIP Income Eligibility Limits for Children as a Percent of the Federal Poverty Line" (Jan. 2017): kff.org/health-reform/state-indicator/medicaid-and-chip-income-eligibility-limits-for-children-as-a-percent-of-the-federal-poverty-level
Kaiser Family Foundation, "Medicaid Income Eligibility Limits for Adults as a Percent of the Federal Poverty Line" (Jan 2017): kff.org/health-reform/state-indicator/medicaid-income-eligibility-limits-for-adults-as-a-percent-of-the-federal-poverty-level
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These instructions focus on using the tool to claim the affordability exemption but the tool also allows a taxpayer to find their SLCSP to complete or correct Column B of the Form 1095-A.
• The Tax Tool will ask you to enter all members of the household, even those with other coverage or exemption.
reference: how to use the healthcare.gov tax tool
hc.gov tax tool: affordability exemption
WHO SHOULD USE THIS TOOL?
Taxpayers who live in federal marketplace (Healthcare.gov) states, or in a state that uses the Healthcare.gov technology. If you live in a state with a state-based marketplace, contact the marketplace by phone or online.
To begin, go to Healthcare.gov/Tax-Tool. • Select "Claim an 'affordability' exemption"
Step 1 for each family member determines whether someone will be included in the lowest cost bronze plan (LCBP), which you will enter on Line 1 of the ACA Marketplace Coverage Affordability Worksheet.
Follow the instructions closely! Check the boxes for the months the person was:
• Eligible for employer-sponsored coverage (from their own employer or a member of their family on the same tax return)• Eligible for another exemption
Leave the boxes unchecked if those circumstances don’t apply.
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Next, several screens will ask for the family’s zip code and whether they lived in the same place for all months.
Then, confirm the information for each family member.
Remember: Print out the review information and the results page screens for the taxpayer's records.
reference: how to use the healthcare.gov tax tool
Step 2 for each family member determines whether someone will be included in the second lowest cost silver plan (SLCSP), which you will enter on Line 10 of the ACA Marketplace Coverage Affordability Worksheet.
Follow the instructions closely! Check the boxes for the months the person was:
• Eligible for or enrolled in Medicare, Medicaid, or CHIP. Months will be disabled if you said in Step 1 that a person was eligible for employer-sponsored coverage or exemption. Refer to the eligibility table addendum to make an accurate assumption about Medicaid eligibility.
Leave the boxes unchecked if those circumstances don’t apply.
hc.gov tax tool: step 2
hc.gov tax tool: review information
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reference: how to use the healthcare.gov tax tool
hc.gov tax tool: results page
The results page shows the LCBP and SLCSP for the household.
Remember: Print out the review information and the results page screens for the taxpayer's records.
NOTE: If household income on the ACA Marketplace Worksheet is less than 100% FPL or greater than 400% FPL, use only the LCBP. Do not enter the SLCSP amount on Line 10 of the Worksheet (because the person is not eligible for PTC).
If the taxpayer’s filing status is married filing separately, use only the LCBP. Enter zero on Line 10 of the Worksheet (because the person is not eligible for PTC).
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reference: state-based marketplace tools
STATE LINKS TIPS
California 2016 plan compare tool not available at this time - see tips
Exemptions information
Covered California has not made 2016 plan cost information available online. Call the marketplace or use www.healthpocket.com for 2016 plan information.
Colorado LCBP: tinyurl.com/ColLCBP
SLCSP: tinyurl.com/ColSLCSP
General tax information; Exemptions information
The LCBP tool only allows entry of one family member at a time. List everyone who should be included in Line 1.
The SLCSP allows the entry of multiple household members. Only enter those who should be included in Line 10.
Connecticut The LCBP and SLCSP tools have not been updated for 2016 (as of 2/24/2017) - see tips
Health Access CT has not made 2016 plan cost information available online. Call the marketplace or use www.healthpocket.com for 2016 plan information. (2015 Affordability Exemption Calculator available at FAQ: Tax Penalities, Q3)
District of Columbia
LCBP: tinyurl.com/DC-Bronze
SLCSP: tinyurl.com/DC-Silver
General tax information
The LCBP is a pdf. Look up cost of plan for each family member.
The SLCSP is a tax tool that asks enough questions to do an approximate Medicaid determination, which eliminates the guesswork for tax preparers in understanding whether the taxpayer should have a value on Line 10. To calculate SLCSP in desired months, indicate that everyone who meets the definition for Line 10 were enrolled in a health plan in those months.
Hawai'i Use Healthcare.gov As of TY2016, Hawai'i no longer uses a state-based marketplace website for enrollment.
Idaho General tax information: tinyurl.com/ID-tax-info (click on the Second Lowest Cost Silver Calculator)
The SLCSP and LCBP calculator is a downloadable Excel tool. Run the tool twice if the people included in Line 1 and Line 10 are different.
Kentucky LCBP: tinyurl.com/Ky-Bronze
SLCSP: tinyurl.com/Ky-Silver
General tax information
Note that the instructions for the LCBP are misleading. Enter everyone who meets the definition for Line 1, including people in public coverage. Do not just enter people who are uninsured.
To calculate SLCSP for desired months, indicate that everyone who meets the definition for Line 10 was enrolled in a health plan in those months.
Maryland LCBP: tinyurl.com/MD-Bronze
SLCSP: tinyurl.com/MD-Silver
General exemptions information
Note that the instructions for the LCBP are incorrect. Enter everyone who meets the definition for Line 1 (including people in public coverage). Do not just enter people who are uninsured.
To calculate SLCSP for desired months, indicate that everyone who meets the definition for Line 10 was enrolled in a health plan in those months.
Massachusetts LCBP: tinyurl.com/MassLCBP
SLCSP: tinyurl.com/MassSLCSP
Tax Documents and Exemptions; General tax information
To calculate SLCSP for desired months, indicate that everyone who meets the definition for Line 10 were enrolled in a health plan in those months. Remember to enter only the people who meet the definitions for inclusion in Lines 1 and 10.
Minnesota Use Plan Compare tool: tinyurl.com/MN-PlanFinder
General exemptions information
This tax tool requires use of the plan compare tool. Remember that the people who are included in Line 1 and Line 10 of the Marketplace Affordability Worksheet may be different. You may need to run two searches of the plan selection tool. Sort plans from lowest to highest cost.
New Mexico Use Healthcare.gov
New York LCBP: tinyurl.com/NY-Bronze
SLCSP: tinyurl.com/NY-Silver
Instructions and links
Nevada Use Healthcare.gov
Oregon Use Healthcare.gov
Rhode Island LCBP and SLCSP premiums by age: tinyurl.com/RI-Premiums
